For a few years now, I’ve been investing in technology startups for a very specific reason. I’ve built a number of businesses, but when I turned my attention to the online software space, I quickly discovered that it required a completely different approach to anything I had done before. Creating a property development business or an education consultancy required a certain level of professionalism and dedication, but the bar for making an online startup work turned out to be much much higher.
Alongside reading, researching and studying, and actually setting up my own first software company – 42 Tasks – I realised that the fastest way to acquire the knowledge and skillset that I needed to succeed was to learn from people who had already done so. I know many entrepreneurs, and spend a lot of time with them – mainly because when you’re involved in fast-growth businesses, it is difficult to find the usual topics of conversation interesting. You get acclimatised to big ups and huge downs – to amazing breakthroughs one day and to huge failures the next. I remember Reid Hoffman, the founder of LinkedIn, saying that he flatly refused to go to parties and talk about what a great discount someone got on their new garden furniture. I completely agree, and so choose to spend time with people who enjoy talking about grand visions and great opportunities.
I knew that I needed to grow this network and surround myself by ever more experienced and successful entrepreneurs. Initially, I approached some of the people I most respected, and asked for their time to mentor me. But I quickly realised that the power balance in a relationship of this nature was always severely skewed, and I would always be asking for favours and waiting for them to find time for me. This wasn’t going to work. I had a lot of respect for their achievements, but nonetheless saw them as peers and expected the same respect for my own achievements as well. The mentor relationship didn’t lead to this. It became clear that I needed to find another way.
After a lot of thinking, I noticed that even the most experienced, and wealthy, technology entrepreneurs didn’t fund their companies entirely on their own. They liked to optimise the risk profile of their capital, and to get other people involved in their business in order to leverage their intellect and turn them into brand ambassadors. They would raise money to validate their business, and its market valuation. By becoming an angel investor, I would be able to achieve the exact goal which I initially set for myself.
I have now invested in over ten businesses, and have built relationships with each of the founders. The investment is a write-off for me – I hope not to lose it, but ultimately that is irrelevant. I sit on the board of two of these – chosen specifically since the founders of both have more than twenty years of experience, and a number of successful technology exits. When I come across successful individuals, I always ask myself whether I would be happy to have lived their life, and in both of these cases the answer would be a definite yes. I ask the same question of the company – would I want to have founded it. Based on the response to both of these questions, I choose how much time to spend with the person and the company. I don’t force any input on them, but help in any way I can, and my own eleven years of entrepreneurial experience carries enough value for them to be interested in having me involved in a way that is beyond a simple financial one.
This is a rather long introduction to a rather simple point which I have come to understand through this journey. I have direct access to many companies, and have watched them evolve. Most have grown. One has failed. One has done extremely well. By getting a dataset of this nature, it has been possible to spot certain trends and characteristics of companies and founders who are successful, and I’ve noticed one trend that I have applied to my latest company, Ometria.
The most successful of my investments has delivered a 10x increase in valuation over the past year. It’s still a long way away from an exit, of course, but its growth has been astounding. And the reason for its success so far is described by the title of this post. The founders of this company didn’t try and bootstrap an MVP with a small team. They hired 30 people, they raised a million pounds in seed funding, they got some huge names behind them and they took an extremely professional approach to the development of their application. They knew it was risky. They couldn’t be certain that they would get the traction they needed. If it all went wrong they would have to explain to their employees that they could no longer pay their salaries. And they couldn’t be sure that they would raise the next round of funding to keep growing. But they did. They built an amazing app, they got the traction they needed, and they raised an absolutely massive Series A to expand globally.
This is the approach that I’ve taken with Ometria. My co-founders and I could have quite happily bootstrapped the company and the product for many years as a small team, but instead we have spent the past year hiring the absolute best people. We have set up a marketing strategy that is on the level of a large established company. We have developed processes that are completely ready to scale. We’ve taken time over our product making sure that it is enterprise-ready. Our initial capital will last us until the end of next year, at which point it will be crunch-time. If we validate the product-market fit, then we can take some large-scale investment and start expanding quickly. If not then we will have to make some difficult decisions. But building a technology company, just like playing poker, does not favour the risk-averse. If you aren’t willing to dive in head first, you will never succeed. There is no middle ground. Go big or go home.